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Monthly Archives: February 2014

what you need to know before you invest in the matatu industry.

Many investors are coming to the matatu industry with the wrong attitude and it is sad to see many going back the same way they came, and again, followed by debts. Below are some facts you need to know before you venture in the matatu sector.

1} A Matatu business is an expensive investment.

imax  Most people don’t see a matatu as a rich man’s game- Many associate matatu with the crew who operates them and assume that the ineptness is a sign of cheapness. But to get an edge in this sector, you need not less than half a million Kenyan shillings. This is the list you can start with, and  will take a lot of goodwill and lots of work to start going up the ladder.

With 1/2 a million shillings, you can buy a 7–8yrs old used Toyota. Chances are always 50/50 when it comes to buying a old car; especially one that has been on the Kenyan roads as a matatu for those years. No mechanic can perfectly predict the lifespan of an old engine; Take for instance; if you want to replace the engine of a Toyota 5l. it will cost you not below 350k. Other than that, there are other equally expensive parts like gearbox, complete suspension, differential etc.

Psyco front  For those interested in the minibuses category- the capital goes up to millions of Shillings. The good thing about this class of public service vehicles is that most of them are Brand new and Most banks are will to chip in the finances up-to 70% depending on the prove of ability to pay on the side of the borrower.

A 33 seater minibus complete with seats, governor, safety belts and all the legal requirement is selling at 4.7m at general motors. A further 500k is needed for a comprehensive insurance cover and about 200k for extras- this include, Sacco registration, decorations, advanced music system, trademarks and legal fees like TLB- County Governments parking fees and others. A serious investor in this category will be required to have not less than 5.2 or in-case of financing 2m is the minimum.

2} You need much more than money to succeed.

Many would have been successful matatu investors come to the industry with”joto ya pesa”  This wrong approach of thinking they are wise; is also a ticket that has sent many the way they came if not worse. The fact that you must come up with hundreds of thousands of shilling before you become an investor {as we have seen above to venture into the industry} gives some people the false illusion that they are better off that other small players in the sector. Many make the mistake of ignoring drivers and touts; rather than regarding them as important part of the investment many view them as slaves.

I get many calls from investors and one thing they all have in common is problems with workers. Majority of matatu owners never bothered to employ workers on permanent basis; they mostly relay on casual labor which is widely available at every matatu stage across the country. Casual is cheap as it leaves no string attached, the owner has the control of the vehicle but zero hold/ responsibility on the crew. here, they reach an off record agreement based on targeted income. The problem with this settings is that, no driver will ever agree to shoulder your burden especially in matters to do with police or accidents. Your vehicle will constantly be towed-because the crew took off and left it on the road in case of  police operations, hit and runs or worse hit and run accidents.

3} You are the CEO of your investment.

familiarMany investors lose millions of shillings to fraudster and corrupt government systems that control the matatu business due to their –hands off diplomacy– toward there investments. There is a kikuyu saying that says “kindu no mwene” {only the owner can take care of his property.}

Many people who don’t go far in this sector are those who, learns about the millions laying unclaimed in the passengers transport sector and ‘without’ doing a proper research} rush to make a kill. It doesn’t take much convincing to get somebody to buy a matatu since the demand for public transport in Kenya is obvious, especially in Nairobi due to the rural urban migration we have witnessed in the last 10yrs.The unprecedented hike in fares is an indicator that the demand is going up.

The problem for this “new comers” comes when the car hits the road and the owner starts learning work related vocabularies like, police crackdown, operation, kajo, wire, breakdown, break failure, music copyright, mung’iki, kamjeshi and hundreds of other payable institutions that don’t end up in the work sheet. In an earlier article “{ https://wambururu.wordpress.com/2012/11/27/the-pros-and-cons-of-investing-in-the-matatu-industry/ } I had said that, A matatu investor should be someone who is willing to spend money -legal or otherwise- to get more money. it makes business sense and cents to hire someone to do the dirty work.

4} The make; will make or break you.DSC_0419

The type of vehicle you chose to invest in; will have a lot to do with the success or failing of your investment. There are some brands that have dominated the Kenya public transport sectors for years. Isuzu-Toyota and Nissan have the lions-share in the local market. I have personally handled the three Brands in my many years behind the wheels and each has proven it’s worth.

Isuzu has the title for the most preferred minibus in Kenya’s matatu sector. This is on one hand, because of the availability of new spare parts and reasonable prices but also, because of a long durability record as is evident on our roads. Car makers like Hyudai and Mitsubishi have tried to build cars that can meet the NKR and NQR but they are not there just yet. Even the few ROSA’s we have on our sister routes have their engines replaced with Isuzu 4.3 imports from Uganda.

In the 14 seaters category, Toyota shark is the king of the road. this car has been tested and proven to operate on any road under any weather and ideal for long distance travels. The 5L engine has the power to handle the 14 passengers load with ease and still do long hours of continued driving. the vehicles is fitted with ABS braking system, fuel efficiency and more power as compared to it’s closest competitor the Nissan QD or TD 27. which comes second in passenger transport; the Nissan is easy to maintain and has a reliable backup in terms of spare-parts. It is ideal for short distance urban routes 10–15kilometers} that has less steep hills.

 
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Posted by on February 16, 2014 in Its life, Matatu matters

 

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